Massive unemployment is putting a strain on state benefit funds, and states in turn are trying to recoup the money by raising taxes on employers. In all, 36 states have raised payroll taxes, a strategy that critics say will backfire by putting a crimp on hiring. “Everything’s going up, and business is going down,” one Virginia employer tells USA Today. In that state, taxes have gone up from $95 per employee in 2009 to $171 in 2010.
The increases range from a few dollars in some states to nearly $1,000 per worker in Hawaii. "We don't want to pick this moment of all moments to boost taxes on employers," says an economist at the Brookings Institution. "We want to encourage employers as much as possible to add to their payrolls." Times are tough, however: Twenty-five states have borrowed a total of $25 billion from the federal government to keep up with jobless benefits, and another nine will be in the red by mid-year, reports ProPublica.